Gentry announces Financial and Operating Results for the three and nine months ended September 30, 2007



    CALGARY, Nov. 14 /CNW/ -

    
    HIGHLIGHTS

    Gentry Resources Ltd. ("Gentry") is pleased to announce financial and
operating results for the three and nine months ended September 30, 2007.

    Financial Highlights

    -   Gross revenue for the three months ended September 30, 2007 was up 6%
        to $17,083,645 from $16,146,593 in the comparative period of 2006.
        For the nine month periods, gross revenue was $49,925,274 in 2007
        versus $51,907,950 in 2006.

    -   Funds flow for third quarter 2007 was $5,164,027 ($0.09 per share),
        compared to $7,085,334 ($0.18 per share) recorded in last year's
        third quarter. For the first nine months of 2007, funds flow was
        $18,506,386 ($0.40 per share), compared to $25,570,194 ($0.66 per
        share) in the first nine months of 2006.

    -   Net income was $1,710,390 ($0.03 per share) in the third quarter of
        2007, up from $104,137 ($nil per share) in the 2006 comparative
        period. The Company recorded net income of $1,453,963 ($0.03 per
        share) for the nine month period in 2007 versus $3,688,255 ($0.10 per
        share) recorded in the first nine months of 2006.

    -   Capital expenditures for the third quarter 2007 were $8,070,258
        versus $13,121,421 in the third quarter 2006. The capital program for
        the first nine months of this year totaled $26,450,380 versus
        $32,645,278 spent in the comparative nine month period.

    -   Gentry has a sound financial footing based on the strength of its
        balance sheet and a conservative level of debt. At year end, a debt
        to forward year's cash flow ratio of approximately 1.5 to 1 is
        anticipated, which will provide the flexibility to continue to
        aggressively drill Gentry's extensive opportunity base in 2008.

    Operational Highlights

    -   Daily production for the third quarter averaged 4,226 boe/d, up 7%
        from the 3,936 boe/d recorded in the comparative period of 2006.
        Average daily production for the first nine months of 2007 was 3,916
        boe/d, a 5% decrease from 4,121 boe/d in the corresponding period in
        2006.

    -   Natural gas production for quarter averaged 16,280 mcf/d and oil and
        natural gas liquids averaged 1,512 bbls/d. Gas production for the
        first nine months of 2007 averaged 14,534 mcf/d, while crude oil and
        natural gas liquids production averaged 1,494 bbls/d.

    -   Current production is approximately 5,000 boe/d. The Company is
        aggresively pursuing pipeline and tie-in projects at Princess.
        Approximately 650 boe/d was tied-in early in the fourth quarter with
        another 650 boe/d expected before year end for a total of 1,300 boe/d
        added in the fourth quarter.

    -   Gentry's drilling campaign for the quarter recorded a 79% success
        rate (77% net), with over half of the wells being exploration wells.
        Seventeen wells were drilled (15.8 net) resulting in 11 oil wells
        (9.8 net), three injection/disposal wells (3.0 net) and three
        abandoned wells (3.0 net).

    -   Drilling was initiated on lands acquired at the end of May in two new
        core areas, West Central Alberta and the Peace River Arch. Three
        wells were drilled, all successful. Gentry will be announcing further
        details of activities in these new core areas in the coming months.

    -   A key milestone was reached with completion of the initial earning
        phase of a huge farm-in at Princess. Gentry now has under its control
        a 100% working interest in 203 sections (130,029 acres) on the
        Exploration Block, and has earned 47% of the lands contained under
        the May 2006 exploratory farm-in.

    -   On the Princess Exploration Block, the large Alderson oil emulsion
        and gas conservation battery with fluid handling capacity of 8,000
        bbls/d is on schedule for start-up in mid-December.

    -   Gentry's exit rate for 2007 is now projected at 5,400 boe/d, a
        revision based on high impact gas drilling being inventoried in the
        low price environment, recent changes in the production performance
        of three wells of approximately 500 boe/d, and a reduction in capital
        spending.

    -   Oil volumes should increase to 45% from 39% of production by year end
        as drilling continues to emphasize oil projects in the current high
        oil/low gas pricing environment.



                                              Three months ended September 30
                                                   2007         2006        %
                                                                       change
    -------------------------------------------------------------------------
    Financial
    -------------------------------------------------------------------------
    Revenue                                 $17,083,645  $16,146,593       6
    -------------------------------------------------------------------------
    Funds flow from operations                5,164,027    7,085,334     (27)
    -------------------------------------------------------------------------
      per share - basic                            0.09         0.18     (50)
    -------------------------------------------------------------------------
      per share - diluted                          0.09         0.18     (50)
    -------------------------------------------------------------------------
    Net income (loss)                         1,710,390      104,137   1,542
    -------------------------------------------------------------------------
      per share - basic                            0.03          nil     n/a
    -------------------------------------------------------------------------
      per share - diluted                          0.03          nil     n/a
    -------------------------------------------------------------------------
    Net capital expenditures                  8,070,258   13,121,421     (38)
    -------------------------------------------------------------------------
    Corporate acquisition                     2,796,799            -     n/a
    -------------------------------------------------------------------------
    Net debt                                 57,967,574   48,577,087      19
    -------------------------------------------------------------------------
    Shares outstanding, weighted average     55,167,799   38,602,833      43
    -------------------------------------------------------------------------
    Shares outstanding, diluted              55,167,799   40,389,185      37
    -------------------------------------------------------------------------
    Production
    -------------------------------------------------------------------------
    Oil & liquids (bbls/d)                        1,512        1,538      (2)
    -------------------------------------------------------------------------
    Gas (mcf/d)                                  16,280       14,388      13
    -------------------------------------------------------------------------
    Oil equivalent (boe/d)                        4,226        3,936       7
    -------------------------------------------------------------------------
    Average Prices
    -------------------------------------------------------------------------
    Oil & liquids (per bbl)                 $     65.72  $     61.92       6
    -------------------------------------------------------------------------
    Gas (per mcf)                                  5.30         5.58      (5)
    -------------------------------------------------------------------------
    Oil equivalent (per boe)                      43.94        44.59      (1)
    -------------------------------------------------------------------------
    Operating Netbacks
    -------------------------------------------------------------------------
    Oil & liquids (per bbl)                 $     35.94  $     37.80      (5)
    -------------------------------------------------------------------------
    Gas (per mcf)                                  1.80         2.45     (27)
    -------------------------------------------------------------------------
    Oil equivalent (per boe)                      19.80        23.72     (17)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                               Nine months ended September 30
                                                   2007         2006        %
                                                                       change
    -------------------------------------------------------------------------
    Financial
    -------------------------------------------------------------------------
    Revenue                                 $49,925,274  $51,907,950      (4)
    -------------------------------------------------------------------------
    Funds flow from operations               18,506,386   25,570,194     (28)
    -------------------------------------------------------------------------
      per share - basic                            0.40         0.66     (39)
    -------------------------------------------------------------------------
      per share - diluted                          0.40         0.63     (37)
    -------------------------------------------------------------------------
    Net income (loss)                         1,453,963    3,688,255     (61)
    -------------------------------------------------------------------------
      per share - basic                            0.03         0.10     (70)
    -------------------------------------------------------------------------
      per share - diluted                          0.03         0.09     (67)
    -------------------------------------------------------------------------
    Net capital expenditures                 26,450,380   32,645,278     (19)
    -------------------------------------------------------------------------
    Corporate acquisition                    76,392,111            -     n/a
    -------------------------------------------------------------------------
    Net debt                                 57,967,574   48,577,087      19
    -------------------------------------------------------------------------
    Shares outstanding, weighted average     46,325,798   38,629,930      20
    -------------------------------------------------------------------------
    Shares outstanding, diluted              46,325,798   40,326,260      15
    -------------------------------------------------------------------------
    Production
    -------------------------------------------------------------------------
    Oil & liquids (bbls/d)                        1,494        1,382       8
    -------------------------------------------------------------------------
    Gas (mcf/d)                                  14,534       16,431     (12)
    -------------------------------------------------------------------------
    Oil equivalent (boe/d)                        3,916        4,121      (5)
    -------------------------------------------------------------------------
    Average Prices
    -------------------------------------------------------------------------
    Oil & liquids (per bbl)                      $58.49       $60.42      (3)
    -------------------------------------------------------------------------
    Gas (per mcf)                                  6.57         6.49       1
    -------------------------------------------------------------------------
    Oil equivalent (per boe)                      46.70        46.14       1
    -------------------------------------------------------------------------
    Operating Netbacks
    -------------------------------------------------------------------------
    Oil & liquids (per bbl)                      $32.48  $     38.27     (15)
    -------------------------------------------------------------------------
    Gas (per mcf)                                  2.87         3.43     (16)
    -------------------------------------------------------------------------
    Oil equivalent (per boe)                      23.05        26.48     (13)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note: Barrels of oil equivalent (boe) have been calculated by converting
          gas to boe at a ratio of 6:1.
    

    PRESIDENT'S MESSAGE TO SHAREHOLDERS

    The past quarter has been one of Gentry's most active in recent years
with an aggressive drilling campaign in the Greater Princess Area, along with
the planning of tie-in projects to bring new wells onstream as quickly as
possible. At the same time, the technical teams have been integrating the
assets acquired at the end of May in two new core areas, West Central Alberta
and the Peace River Arch, a process that is essentially complete.
    Gentry has drilled with 86% success this year (85% net). The drilling
campaign at Princess yielded two new oil pool discoveries and a sizable new
gas pool discovery. Gentry's newest core areas, West Central Alberta and the
Peace River Arch, both have high impact potential and Gentry initiated
drilling during the quarter with three wells which are all onstream as oil
producers. The details of activity will not be discussed in this report due to
competitive reasons; suffice to say that Gentry remains confident that both
new core areas provide a substantial platform for future growth.
    More importantly, Gentry is on a firm financial footing to exploit the
potential in all three of its core areas. At year end, the Company anticipates
a debt to forward year's cash flow ratio of approximately 1.5 to 1, which will
provide the flexibility to continue to aggressively explore and develop
Gentry's extensive opportunity base in 2008.

    Quarterly production additions

    Production in the third quarter averaged 4,226 boe/d, up 7% from 3,936
boe/d in last year's third quarter. Volume growth was hampered by regulatory
delays for two water disposal wells in the Princess area. The applications
were approved in late September and the affected wells were back on production
early in the fourth quarter. The "acquisition" assets performed at a constant
1,500 to 1,600 boe/d for most of the third quarter, although production from a
number of properties was curtailed in September for scheduled gas plant
turnarounds.
    Current production is approximately 5,000 boe/d. The Company is
aggresively pursuing pipeline and tie-in projects at Princess. Approximately
650 boe/d was tied-in early in the fourth quarter with another 650 boe/d
expected before year end for a total of 1,300 boe/d added in the fourth
quarter.

    Greater Princess

    96 freehold sections earned

    An important milestone has been reached with Gentry earning 96 sections
of land (61,440 net acres) by completing the initial earning phase of its
sizable farm-in at Princess. As announced on November 5, the Company has under
its control a 100% working interest in 203 sections (130,029 acres)
exploratory block, and has earned 47% of the lands contained under the May
2006 exploratory farm-in. In addition, having completed the initial earning
phase, Gentry has elected to continue to "drill to earn" on the remaining 53%
of the unearned exploratory block, by earning six adjoining sections for every
exploration well it drills. Since May of 2006 through two farm-ins, Gentry has
added 78,400 net acres to its Princess land holdings and controls over 457
sections.
    Under the initial phase of the farm-in commitment, Gentry was required to
drill 13, mostly exploration, wells testing for Pekisko reservoirs. The
results of this intensive and technically-driven capital program, in which
Gentry exceeded the required 13-well commitment, indicate the Pekisko is
hydrocarbon-bearing and has several discrete reservoir trends through a 50 km
band extending the length and breadth of these farm-in lands. These results
are consistent with the highly productive Pekisko fairway to the north and
west of Gentry's large land block.

    Drilling campaign

    An aggressive drilling campaign continued in the third quarter with a
focus on oil prospects in the Greater Princess Area of Southern Alberta. The
Company also embarked on initial drilling of its newly-acquired assets.
    In total, Gentry drilled 17 wells (15.8 net) resulting in 11 oil wells
(9.8 net), three injection/disposal wells (3.0 net) and three abandoned wells
(3.0 net) for a success rate of 79% (77% net). Three of the oil wells 
(1.8 net) were drilled on the recently acquired lands. Nine of the 17 wells
were exploration wells (9.0 net) resulting in four oil wells (4.0 net).
    For the first nine months of 2007, Gentry drilled 41 wells (38.2 net)
resulting in 24 oil wells (21.7 net), four gas wells (3.5 net), four
injection/disposal wells (4.0 net), five abandoned wells (5.0 net) and four
cased wells awaiting completion (4.0 net) for a success rate of 86% (85% net).

    Tie-in projects

    To monetize the Company's drilling successes and behind-pipe volumes in
the Princess area, Gentry is moving forward with an active facility and
pipeline tie-in construction operation. Pipeline and production facilities are
being licensed and installed to tie-in high deliverability wells recently
discovered on the Exploration Block. Six tie-in projects have been completed
in the Tilley-West Tide Lake corridor and all of the wells have recently been
placed on production.
    The largest project, the Alderson oil emulsion and gas conservation
battery, is expected to see first production by mid-December and is located
15 km south of existing facilities in the Tilley and West Tide Lake
development areas. The main battery vessels are in place with piping and
electrical work nearing completion. Additionally, a 24-km pipeline gathering
system and a gas conservation pipeline to a third party sour gas facility is
under construction.
    All of these tie-in projects are aimed at materially reducing operating
costs by lowering trucking expenses for oil and water, a large component of
costs at Princess.
    The following table summarizes the expected Princess production additions
once tie-ins and facilities are through the initial start-up phase.

    
                            Expected Start-up
    Project         BOE/d                Date    Comments
    -------------------------------------------------------------------------
    1-6-19-11W4                                   One existing well and 5 new
     to West Tide                                 wells  to tie-in with this
     Lake Facility    250   On production Nov 4   pipeline
    -------------------------------------------------------------------------
    4-18-19-11W4                                  Two gas wells in 3 mi(2)
     & 13-7-19-11W4   200   On production Nov 3   Pekisko pool
    -------------------------------------------------------------------------
    16-29-18-11W4      75   On production Nov 5   Single well battery
    -------------------------------------------------------------------------
    7-30-18-11W4       50   On production Nov 5   Single well battery
    -------------------------------------------------------------------------
    6-13-19-12W4                                  Tie into 4-13 going to
     & 2-14-19-12W4    50   On production Nov 6   Tilley battery
    -------------------------------------------------------------------------
    9-15-19-12W4       25   On production Nov 6   Oil well, tie into Tilley
                                                  battery
    -------------------------------------------------------------------------
    Total Completed
     Projects         650
    -------------------------------------------------------------------------
    8-14-19-11W4       50   November 15th         High rate well, tie well
                                                  into West Tide Lake battery
    -------------------------------------------------------------------------
    14-6-19-11W4       50   November 15th         Oil well, tie into West
                                                  Tide Lake battery
    -------------------------------------------------------------------------
    Alderson Facility                             Tie-in 6 high rate wells,
     and Tie-in                                   relocate facility and tie
     Project          400   December 15th         into gas sales
    -------------------------------------------------------------------------
    11-4-17-11W4       75   December 15th         Single well battery
    -------------------------------------------------------------------------
    14-1-18-12W4       75   December 15th         Single well battery
    -------------------------------------------------------------------------
    Total December
     Projects         650
    -------------------------------------------------------------------------
    Total
     Additions      1,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Acquired Lands

    Initial drilling activity

    The assets acquired in the Peace River Arch and West Central Alberta on
May 31 were largely integrated into operations during the third quarter,
providing Gentry with a material growth platform. Gentry drilled three oil
wells (1.8 net) on these acquisition lands with a 100% success rate.
    The Company recently shot a 3D seismic survey over one of its key
acquisition assets. In 2008, Gentry expects to drill 15 wells divided between
targets identified on the 3D seismic and other key oil targets in the Peace
River Arch and West Central Alberta. The Company anticipates growing its land
position through Crown land sales and farm-ins.

    Outlook

    Negligible impact of royalty changes

    Following an evaluation of the Alberta government's proposed changes to
its oil and gas royalty structure, Gentry has determined that the impact on
its cash flow would be minimal. This negligible impact is due to Gentry's
substantial presence in the Princess area of Southern Alberta, an area
dominated by freehold land tenure which is not affected by the government's
proposed changes. Approximately 55% of Gentry's production is on Alberta
freehold land or in Saskatchewan. The remaining 45% is subject to Alberta
Crown royalties.
    Using publicly available information, Gentry estimates that, based on
current production, the potential impact of the proposed royalty changes would
be a 1-2% increase in corporate cash flows (at $60 Cdn at the wellhead for oil
and $7.00 Cdn/GJ for gas). At higher oil and gas prices, Gentry's cash flows
rise, but not as high as they would under the current royalty structure. If
enacted, the royalty changes would come into effect January 1, 2009.
    Gentry has a large inventory of oil and gas investment opportunities
which would not be affected by the proposed royalty changes, thus providing
the flexibility to continue to allocate capital to projects with the best
return to its shareholders.

    Production guidance

    Gentry's year-end exit production is now forecasted at 5,400 boe/d, a
revision that takes into account a number of factors which have come into play
during the year. Gentry previously projected an exit production rate of 6,200 
to 6,500 boe/d. This forecast was based on a $50 million capital program, gas
pricing in excess of $7.00/mcf, oil at US$65/bbl, and a US/CAD foreign
exchange rate of $0.87:1. In order of importance, Gentry's initial capital
program was prioritized as follows:

    
    -   To complete all earning provisions under the huge Princess farm-in,
        which has been accomplished, and to pursue development around
        existing fluid handling facilities and gathering systems.

    -   Test the gas potential in the deeper Nisku play at Princess. Results
        to date have been disappointing with a loss of base production and
        risked production totaling approximately 500 boe/d.

    -   Follow-up gas developments programs in Sedalia (5 to 8 wells),
        Provost (22 wells, 6.0 net), Whitecourt (five wells, 3.0 net) and
        Princess (four wells, 4.0 net). As gas prices softened during the
        year, these programs were inventoried to await a more buoyant natural
        gas price environment. It is important to note that the gas reserves
        remain in place and there are no immediate land tenure issues putting
        these reserves at risk for Gentry.
    

    With the current environment of gas price weakness and generally volatile
market conditions for junior oil and gas stocks, the Company has made it a
priority to maintain a conservative level of debt and financial strength. To
this end, Gentry intends to sell between 100 and 125 boe/d of production prior
to year end and will use the proceeds to reduce its overall indebtedness.

    Drilling going forward

    Gentry is well prepared, operationally and financially, to continue its
aggressive drilling programs in the fourth quarter and beyond. In the fourth
quarter, Gentry plans to drill nine wells in the Princess area, with seven
located on the Exploration Block.
    Gentry now controls 457 sections of land in the Greater Princess Area
with the majority of that land base made up of freehold rights, which negates
concerns with the Alberta government's proposed new royalty structure.
    The Company has significant undrilled opportunities, primarily oil, at
Princess and a three-year 150-well inventory of drill-ready locations. Most of
the land at Princess is covered by 3D seismic. With a number of discoveries
resulting from the focus on exploration drilling in 2007, the Company is well
positioned, through low risk infill drilling programs, to develop these and
other Pekisko oil trends in 2008. Drilling will initially be concentrated near
the production hub created by the Alderson battery, which is expected to be on
production in mid December.
    In planning future drilling programs, Gentry has also taken into account
the time required for the approval process for disposal well applications and
has drilled several potential disposal wells close to the developing
production nodes. These applications will be submitted by year end for
expected approval by early third quarter 2008, which should coincide with
additional tie-ins and increased fluid handling requirements.
    In developing a capital spending program for next year, a crucial goal is
 to ensure capital expenditures remain within cash flow expectations. With the
continuing weakness in AECO gas pricing, both spot pricing and for this coming
winter, the Company has inventoried most of its high impact gas prospects in
favour of continuing to develop its Princess oil play. Gentry believes that a
strong balance sheet and a conservative level of debt will provide the
financial footing for solid performance in 2008.

    MANAGEMENT'S DISCUSSION AND ANALYSIS

    Management's discussion and analysis ("MD&A") should be read in
conjunction with the unaudited interim consolidated financial statements for
the three and nine months ended September 30, 2007 and the audited
consolidated financial statements and MD&A for the year ended December 31,
2006.
    Where amounts are expressed on a barrel of oil equivalent ("boe") basis,
natural gas has been converted at a ratio of six thousand cubic feet of
natural gas to one boe. This ratio is based upon an energy equivalent
conversion method primarily applicable at the burner tip and does not
represent economic equivalence at the wellhead or point of sale. Boe figures
may be misleading, particularly if used in isolation.
    Included in the MD&A are references to financial measures commonly used
in the oil and gas industry such as funds flow from operations, funds flow
from operations per share and operating netbacks. These measures have no
standardized meaning, are not defined by Canadian generally accepted
accounting principles ("GAAP"), and accordingly are referred to as non-GAAP
measures. These supplemental measures are used by management to assess
operating results between years and between peer companies as they provide an
indication of the results generated by the Company's principal business
activities before the consideration of how these activities are financed or
how the results are taxed.
    Gentry determines funds flow from operations as net income prior to
provisions for depletion, depreciation and accretion, stock-based
compensation, future income taxes, gains (and losses) on sale of investments,
and after asset retirement expenditures. Funds flow from operations per share
is calculated using the weighted average basic and diluted shares used in the
calculation of net income per share. Operating netbacks are calculated by
deducting royalty and production expenses from production revenue. Gentry's
reported amounts may not be comparable to similarly titled measures reported
by other companies. Funds flow from operations should not be considered an
alternative to, or more meaningful than, cash provided by operating,
investing, and financing activities or net income as determined by Canadian
GAAP as an indicator of the Company's performance or liquidity.
    Certain disclosure in this MD&A contains forward-looking statements that
involve risks and uncertainties. Such information, although considered
reasonable by Gentry at the time of preparation, may prove to be incorrect and
actual results may differ materially from those anticipated in the statements
made. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Such risks and uncertainties include, but are not limited to: exploration,
development and production risks; insurance; prices, markets and marketing of
crude oil and natural gas; substantial capital requirements; liquidity;
competition; environmental risks; reserves replacement; reliance on operators
and key employees; corporate matters; permits and licenses; additional funding
requirements; aboriginal claims; issuance of debt; availability of drilling
equipment; access restrictions; cost inflation; title defects; uncertainty of
reserve information; Kyoto protocol; and government regulation and taxation.
    This MD&A has been prepared as of November 9th 2007.

    Revenue, Production and Pricing

    Gross production revenue was $17.08 million in the third quarter of 2007,
compared to $16.15 million recorded in the third quarter last year. Lower oil
and ngls volumes decreased revenue by $149 thousand but this was more than
offset by the higher gas volumes which caused an increase of $972 thousand.
The increase in crude oil and ngls pricing caused revenue to increase by $529
thousand, more than offsetting the $419 thousand lost due to the lower gas
prices.
    For the nine month period ended September 30, 2007, gross revenue was
$49.93 million, down slightly from the $51.91 million recorded in the
comparative period. An increase of $1.84 million due to higher oil and ngls
volumes could not offset the $3.36 million lost due to lower gas volumes. The
decrease in crude oil and ngls pricing caused revenue to decrease by $787
thousand, more than offsetting the $317 thousand realized from slightly higher
gas prices.

    
                       Three months ended            Nine months ended
                          September 30                  September 30
    -------------------------------------------------------------------------
                                                 %                       %
                                2007    2006  change    2007    2006  change
    -------------------------------------------------------------------------
    Oil and Liquids
    -------------------------------------------------------------------------
    Revenue ($000s)            9,144   8,764       4  23,855  22,799       5
    -------------------------------------------------------------------------
    Volumes (bbls/d)           1,512   1,538      (2)  1,494   1,382       8
    -------------------------------------------------------------------------
    Pricing ($/bbl)            65.72   61.92       6   58.49   60.42      (3)
    -------------------------------------------------------------------------
    Natural Gas
    -------------------------------------------------------------------------
    Revenue ($000s)            7,940   7,383       8  26,070  29,109     (10)
    -------------------------------------------------------------------------
    Volumes (mcf/d)           16,280  14,388      13  14,534  16,431     (12)
    -------------------------------------------------------------------------
    Pricing ($/mcf)             5.30    5.58      (5)   6.57    6.49       1
    -------------------------------------------------------------------------
    Oil Equivalent
    -------------------------------------------------------------------------
    Revenue ($000s)           17,084  16,147       6  49,925  51,908      (4)
    -------------------------------------------------------------------------
    Volumes (boe/d)            4,226   3,936       7   3,916   4,121      (5)
    -------------------------------------------------------------------------
    Pricing ($/boe)            43.94   44.59      (1)  46.70   46.14       1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Overall, Gentry's third quarter production volumes were lower than
anticipated. While the Company did realize the benefit of approximately
1,600 boe/d from the acquisition of 1317010 Alberta Ltd. ("1317010") which
closed May 31, 2007 with an effective date of April 1, 2007 (the
"Acquisition"), these volumes were partially offset by production issues at
Princess. During the quarter, the Company lost approximately 500 boe/d of
Nisku gas production, had disappointing production performance from a
previously significant Pekisko gas well, and was forced to shut-in 200 - 300
boe/d of production due to delays in Alberta Energy & Utilities Board
approvals for water disposal wells.

    Royalties

    Gentry's royalty expenses, which were net of Alberta Royalty Tax Credit
in 2006, increased 6% to $3.86 million in the third quarter of 2007 from
$3.64 million in the comparative period. Expressed as a percentage of
production, royalties were consistent at 22.6% versus 22.5% a year ago.
    For the nine month period ended September 30, 2007, royalties were
$11.47 million, down 2% from the $11.75 million recorded a year ago. As a
percentage of production, royalties were 23.0% in 2007 versus 22.6% in the
first nine months of 2006.

    Production Expenses

    In the third quarter of 2007, production expenses increased to
$5.53 million from $3.92 million a year ago. On a unit basis, costs increased
to $14.22/boe versus $10.83/boe a year earlier. The high level of industry
activity and tight oilfield services markets resulted in a general increase in
field operating costs. Also contributing to the rise in expenses were higher
oil trucking and transportation costs as the Company realized an opportunity
to increase some of its crude oil pricing and overall netbacks. Once a
facility and tie-in project at Alderson/Princess is completed in late 2007,
Gentry expects lower unit production expenses due to lower emulsion and water
hauling costs.
    For the first nine months of 2007, production expenses were
$13.81 million compared to $10.36 million a year earlier. On a boe basis,
costs were $12.92/boe in 2007 and $9.21/boe in 2006. While unit measurement
costs increased over the comparative period in part for similar reasons to
those stated above, the 2007 figures also reflect higher gas gathering and
processing fees that only came into effect during the latter part of 2006.
Going forward, these fees are expected to decline as additional volumes are
tied in and new gathering and processing agreements are executed.

    General and Administrative Expenses

    Gentry's general and administrative expenses increased to $1.47 million
in the third quarter of 2007 from $813 thousand in the third quarter of 2006,
with additional staffing and compensation costs accounting for almost half of
this increase. Higher consulting and professional fees, in part associated
with integrating the assets acquired in May 2007, also contributed to the
overall rise in expenditures. On a barrel of oil equivalent basis, general and
administrative expenses were $3.77/boe versus $2.25/boe in the comparative
quarter. Going forward, Gentry expects its per unit figures to fall as
additional production volumes are brought on stream.
    For the nine month period ended September 30, 2007, general and
administrative costs were $3.63 million versus $2.40 million a year ago. On a
unit measurement basis, this equates to $3.39/boe in 2007 and $2.13/boe in
2006. Again, additional staffing and compensation costs were the largest
contributing factor to this increase.

    Interest Expense

    Gentry's interest expense was $872 thousand in the third quarter of 2007
versus $573 thousand in the third quarter of 2006. A higher utilization of the
credit facility as a result of the Acquisition was the main reason behind the
increase.
    For the nine months ended September 30, 2007, Gentry's interest expense
was $2.21 million versus $1.49 million in the comparative period. As with the
third quarter figures, a higher utilization of the credit facility was the
main reason behind the growth of this expense.

    Stock-based Compensation

    Gentry's stock-based compensation expense for the third quarter of 2007
was $619 thousand. Of this amount, $588 thousand related to the amortization
and vesting of stock options and $31 thousand related to the Company's
Employee Share Ownership Plan ("ESOP"). This compares to stock-based
compensation of $519 thousand a year ago, $491 thousand of which related to
stock options and $28 thousand to the ESOP.
    For the nine month period ended September 30, 2007, stock-based
compensation expense was $1.59 million versus $1.17 million a year ago. In
2007, 1.41 million stock options were granted at an average price of $3.92 per
option, the cost of which is being amortized over the life of the options.

    Depletion, Depreciation and Accretion

    Depletion, depreciation and accretion charges for the third quarter of
this year increased to $7.93 million from $6.08 million a year ago. The
addition of assets from the Acquisition increased the Company's depletable
asset base causing the increase in these costs. On a unit measurement basis,
costs were $20.40/boe in 2007 versus $16.78/boe a year ago.
    For the nine month periods, depletion, depreciation, and accretion
charges were $20.26 million in 2007 and $18.82 million in 2006, or $18.95/boe
and $16.73/boe respectively.

    Income Taxes

    Gentry's current income tax expense for the third quarter of 2007
decreased to $57 thousand from $80 thousand in the comparative period of 2006.
Future taxes also fell, amounting to a recovery of $606 thousand versus an
expense of $423 thousand in the comparative period.
    For the nine months ended September 30, 2007, current taxes were $133
thousand versus $255 thousand a year ago. The Company booked a future tax
recovery of $277 thousand for the first nine months of 2007 compared to an
expense of $1.98 million in the first nine months of 2006. The reduced pre-tax
profitability and lower tax rates were the primary reasons for the overall
decrease in taxes.

    Funds Flow from Operations and Net Income

    Funds flow from operations for the third quarter of 2007 decreased to
$5.16 million from $7.09 million in the comparative quarter. Lower than
anticipated volumes and an increase in production expenses contributed to the
lower figures in 2007. On a per share basis, funds flow from operations
reduced to $0.09 per share ($0.09 diluted) in 2007 from $0.18 per share ($0.18
diluted) in the third quarter of 2006 as the funds flow was spread out over a
greater number of shares in 2007 due to the 16,250,000 common shares issued
pursuant to the $65 million financing in May 2007.
    For the first nine months of 2007, funds flow from operations was
$18.51 million compared to $25.57 million for the first nine months of 2006.
This amounts to $0.40 per share ($0.40 diluted) in 2007 and $0.66 per share
($0.63 diluted) in 2006. The 2007 figures were impacted by the lower volumes
and higher expenses.
    The Company recorded net income of $1.71 million in the third quarter of
2007 versus just $104 thousand in the third quarter of 2006. This amounted to
$0.03 per share ($0.03 diluted) in 2007 versus $nil per share ($nil diluted)
in 2006. The decline in fund flows from operations was more than offset by the
$4.35 million gain realized on the sale of a portion of its short-term
investments as the Company sold five million of its 10.68 million shares of
Stratic Energy Corporation.
    For the first nine months of 2007, Gentry recorded net income of
$1.45 million compared to a gain of $3.69 million for the first nine months of
2006. This amounts to $0.03 per share ($0.03 diluted) in 2007 and $0.10 per
share ($0.09 diluted) in 2006.

    
    Operating Netbacks
                                  Three months ended       Nine months ended
                                     September 30             September 30
    ($/boe)                       2007           2006      2007         2006
    -------------------------------------------------------------------------
    Selling price                43.94          44.59     46.70        46.14
    -------------------------------------------------------------------------
    Royalties (net of ARTC)      (9.92)        (10.04)   (10.73)      (10.45)
    -------------------------------------------------------------------------
    Operating cost              (14.22)        (10.83)   (12.92)       (9.21)
    -------------------------------------------------------------------------
    Operating netback            19.80          23.72     23.05        26.48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Capital Expenditures and Corporate Acquisition

    Capital expenditures were $8.07 million in the most recently completed
quarter versus $13.12 million incurred in the comparative three-month period.
For the nine month periods ended September 30, capital expenditures were
$26.45 million and $32.65 million for 2007 and 2006 respectively. These
figures do not include the Acquisition, which was priced at $74.25 million,
subject to normal closing adjustments.

    
                                  Three months ended       Nine months ended
                                     September 30             September 30
    ($000s)                       2007           2006      2007         2006
    -------------------------------------------------------------------------
    Drilling and completions     6,110          8,129    15,637       13,553
    -------------------------------------------------------------------------
    Facilities and equipping     1,382          4,693     8,095       12,073
    -------------------------------------------------------------------------
    Land and seismic               192            (33)    1,326        5,885
    -------------------------------------------------------------------------
    Asset acquisitions, net         24              -        97            -
    -------------------------------------------------------------------------
    Capitalized expenses           321            306     1,203        1,071
    -------------------------------------------------------------------------
    Other                           41             26        92           63
    -------------------------------------------------------------------------
                                 8,070         13,121    26,450       32,645
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Liquidity and Capital Resources

    Funds for the Acquisition were obtained through a subscription receipts
offering and increased credit facilities. In May 2007, Gentry issued
12,500,000 subscription receipts at $4.00 per receipt and 3,750,000 common
shares at $4.00 per share. The subscription receipts were converted into
12,500,000 common shares on May 31, 2007 concurrently with the closing of the
Acquisition. At the same time, the Company increased its credit facility from
$50 million to $72.5 million to capture the additional lending value
associated with the newly acquired assets.
    Gentry began the third quarter of 2007 with 55,207,359 common shares
outstanding. During the third quarter, Gentry issued 20,000 common shares
pursuant to the exercise of stock options ($1.46 per share), 22,156 shares
pursuant to the ESOP ($2.81 per share) and repurchased for cancellation
153,500 common shares ($2.53 per share) pursuant to the Company's normal
course issuer bid. As a result, Gentry ended the quarter with 55,096,015
common shares issued and outstanding.
    As of the date of this MD&A, 55,218,399 common shares are outstanding. A
further 4,105,000 shares are reserved for issuance pursuant to outstanding
stock option agreements (at an average exercise price of $3.47 per share).
    For the period October 15, 2007 through October 14, 2008, Gentry has in
place a Normal Course Issuer Bid (the "Bid") pursuant to which the Company may
purchase, for cancellation, up to 2,500,000 of its issued and outstanding
common shares through the facilities of the Toronto Stock Exchange ("TSX").
Gentry's reasoning for the Bid is that from time to time, the purchase of
common shares for cancellation will increase the proportionate interest of,
and be advantageous to, all remaining shareholders. In addition, any purchases
made by Gentry will afford increased liquidity to those shareholders of the
Company who may wish to dispose of their shares. Shareholders may obtain,
without charge, a copy of the Bid notice filed with the TSX by contacting
Gentry directly.
    In the first quarter of 2007, the Company reclassified its Investments to
short-term investments as it contemplated the disposition of these assets. In
the third quarter, Gentry sold five million of its 10.68 million shares in
Stratic Energy Corporation for net proceeds of $5.20 million. Subsequent to
the end of the third quarter, Gentry sold another two million shares for net
proceeds of $1.98 million. Gentry continues to monitor this investment in
light of its own ongoing exploration funding requirements.
    Gentry's net debt (current liabilities in excess of current assets) was
$57.97 million at September 30, 2007 and the credit facility currently stands
at $72.50 million with the next review scheduled on or before February 29,
2008.

    
    Selected Quarterly Information

    The following table summarizes selected quarterly information from the
past eight quarters:

                                                2007
    Three months ended               Q3      Q2      Q1      Q4
    --------------------------------------------------------------
    Production
    --------------------------------------------------------------
    bbls/d                          1,512   1,534   1,435   1,447
    --------------------------------------------------------------
    mcf/d                          16,280  14,217  13,069  17,331
    --------------------------------------------------------------
    boe/d                           4,226   3,904   3,613   4,335
    --------------------------------------------------------------
    Financial ($000s except per
     share amounts)
    --------------------------------------------------------------
    Production revenue             17,084  17,118  15,724  17,924
    --------------------------------------------------------------
    Funds flow from operations      5,164   6,902   6,441   4,875
    --------------------------------------------------------------
      per share - basic              0.09    0.15    0.17    0.13
    --------------------------------------------------------------
      per share - diluted            0.09    0.15    0.16    0.12
    --------------------------------------------------------------
    Net income (loss)               1,710    (411)    154    (931)
    --------------------------------------------------------------
      per share - basic              0.03   (0.01)      -   (0.02)
    --------------------------------------------------------------
      per share - diluted            0.03   (0.01)      -   (0.02)
    --------------------------------------------------------------
    --------------------------------------------------------------


                                        2006            2005
    Three months ended               Q3      Q2      Q1      Q4
    --------------------------------------------------------------
    Production
    --------------------------------------------------------------
    bbls/d                          1,538   1,289   1,317   1,486
    --------------------------------------------------------------
    mcf/d                          14,388  18,139  16,792  14,189
    --------------------------------------------------------------
    boe/d                           3,936   4,312   4,116   3,851
    --------------------------------------------------------------
    Financial ($000s except per
     share amounts)
    --------------------------------------------------------------
    Production revenue             16,147  18,105  17,656  22,165
    --------------------------------------------------------------
    Funds flow from operations      7,085   9,481   9,004  12,652
    --------------------------------------------------------------
      per share - basic              0.18    0.25    0.23    0.33
    --------------------------------------------------------------
      per share - diluted            0.18    0.23    0.22    0.31
    --------------------------------------------------------------
    Net income (loss)                 104   1,639   1,945   2,737
    --------------------------------------------------------------
      per share - basic                 -    0.04    0.05    0.07
    --------------------------------------------------------------
      per share - diluted               -    0.04    0.05    0.07
    --------------------------------------------------------------
    --------------------------------------------------------------
    

    The decline in production in the first quarter of 2007 was the result of
operational issues including line freezing, higher than average declines with
a significant producing well and third party gas plant capacity issues. The
second quarter is typically characterized by wet weather and break-up
conditions, making access to certain locations difficult. The impact of these
issues on second quarter 2007 volumes was somewhat mitigated by June volumes
accruing to Gentry as a result of the Acquisition. Volumes in the third
quarter of 2006 were directly impacted by downtime at three third party
operating facilities which curtailed production at both Princess and Sedalia
and while volumes in the third quarter of 2007 had the benefit of a full three
months of production from the Acquisition, they were still lower than
anticipated due to production issues at Princess.
    Generally speaking, production revenue and funds flow from operations are
largely a function of production volumes and commodity prices. In the fourth
quarter of 2005, Gentry's average sales price was $62.56/boe. In 2006,
although both crude oil and gas prices were quite volatile, most of the change
in production revenue was volume based, as Gentry's average sales price of
$45.83/boe did not vary by more than $2/boe in any one quarter. In 2007,
Gentry's average sales price has fallen from $48.36/boe in the first quarter
to $43.94/boe in the third quarter. Funds flow from operations was lower than
expected in the fourth quarter of 2006 due to increased production expenses
and additional royalties recorded in the period. It was lower in the third
quarter of 2007 due primarily to increased production expenses and general and
administrative costs.
    With regards to net income, the falloff beginning in the third quarter of
2006 is largely attributable to reduced funds flow from operations, while the
turnaround in the third quarter of 2007 was due to the recording of a $4.35
million gain on the sale of a portion of the Company's short-term investments.

    Changes in Accounting Policies

    Effective January 1, 2007, the Company adopted the following new Canadian
Institute of Chartered Accountants ("CICA") sections:

    
        -  Section 1530, Comprehensive Income;
        -  Section 3855, Financial Instruments - Recognition and Measurement;
           and
        -  Section 3865, Hedges.
    

    These new accounting standards provide requirements for the recognition
and measurement of financial instruments and the use of hedge accounting. The
standards have been adopted prospectively and as such the comparative
financial statements have not been restated. Note 2 to the Company's unaudited
interim consolidated financial statements for the three and nine months ended
September 30, 2007 further describes these new policies.
    The adoption of these standards had the effect of increasing the January
1, 2007 Accumulated Other Comprehensive Income balance to $10.76 million from
$nil, and the recording of $5.74 million and $7.36 million as losses to
Comprehensive Income and Accumulated Other Comprehensive Income during the
three and nine month periods ended September 30, 2007 respectively. These
changes are required as a result of the Company classifying its short-term
investments as available-for-sale and recognizing the gains and losses from
the changes in fair value of those investments. Gentry determines the fair
value of its short-term investments by multiplying the bid price per share of
those investments by the number of shares it holds. The largest risk
associated with these short-term investments is fluctuations in share price,
as they impact fair value and cause volatility in the value of the asset and
Comprehensive Income until such time as the Company elects to dispose of those
shares. Gentry monitors its short-term investments on a regular basis and at
the time of writing, has sold approximately two thirds of its investment.
    Also effective January 1, 2007, the Company adopted the revised
recommendations of CICA Section 1506, Accounting Changes. Under the revised
standards, voluntary changes in accounting policies are permitted only if they
result in financial statements which provide more reliable and relevant
information. Accounting policy changes are applied retrospectively unless it
is impractical to determine the period or cumulative impact of the change.
Corrections of prior period errors are applied retrospectively and changes in
accounting estimates are applied prospectively by including these changes in
earnings. These standards are effective for all changes in accounting
policies, changes in accounting estimates and corrections of prior period
errors initiated in periods beginning on or after January 1, 2007.
    In conjunction with the Acquisition, the Company recorded an amount for
Goodwill. Goodwill represents the excess of the purchase price of the business
combination acquired over the fair value of the assets acquired at the date of
acquisition. Goodwill is not amortized but is subject to an annual impairment
review or more frequent if circumstances exist that might indicate the value
is impaired. Should the carrying value exceed the fair value of Goodwill, the
carrying value will be written down to the fair value. The test for impairment
is conducted by comparing the book value to the fair value of the net assets
acquired.
    On June 1, 2007, the Company amalgamated with its wholly-owned
subsidiaries, 1317010 and Gentry Resources (West Africa) Inc. The consolidated
financial statements include the amounts of these subsidiaries up until their
amalgamation.

    Disclosure and Internal Controls over Financial Reporting

    The Chief Executive Officer and Chief Financial Officer have designed or
caused to be designed under their supervision a process of disclosure and
internal controls over financial reporting. The process was designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in
accordance with Canadian GAAP. There were no changes in the Company's
disclosure and internal controls over financial reporting during the three and
nine months ended September 30, 2007 that materially affected, or is
reasonably likely to affect, the Company's disclosure and internal controls
over financial reporting. It should be noted that a control system, no matter
how well conceived or operated, can only provide reasonable, not absolute,
assurance that the objectives of the control system are met.


    
    CONSOLIDATED BALANCE SHEETS

                                                 September 30,   December 31,
                                                         2007           2006
                                                   (unaudited)      (audited)
    -------------------------------------------------------------------------

    ASSETS

    Current
    -------------------------------------------------------------------------
      Cash and cash equivalents                 $      64,568  $      18,406
    -------------------------------------------------------------------------
      Accounts receivable                          17,665,159     11,992,126
    -------------------------------------------------------------------------
      Prepaid expenses                              1,612,997        580,361
    -------------------------------------------------------------------------
      Short-term investments (note 8)               4,944,940              -
    -------------------------------------------------------------------------
                                                   24,287,664     12,590,893
    -------------------------------------------------------------------------
    Investments                                             -      1,809,583
    -------------------------------------------------------------------------
    Property and equipment (note 4)               211,084,965    127,425,551
    -------------------------------------------------------------------------
    Goodwill (note 3)                               5,985,970              -
    -------------------------------------------------------------------------
                                                $ 241,358,599  $ 141,826,027
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES & SHAREHOLDERS' EQUITY

    Current
    -------------------------------------------------------------------------
      Accounts payable and accrued liabilities  $  22,947,841  $  18,858,031
    -------------------------------------------------------------------------
      Income taxes payable                            157,397        294,859
    -------------------------------------------------------------------------
      Bank debt (note 5)                           59,150,000     40,750,000
    -------------------------------------------------------------------------
                                                   82,255,238     59,902,890
    -------------------------------------------------------------------------
    Asset retirement obligations (note 6)           9,662,858      5,104,300
    -------------------------------------------------------------------------
    Future income taxes                            16,843,163     12,393,282
    -------------------------------------------------------------------------
                                                  108,761,259     77,400,472
    -------------------------------------------------------------------------
    Share capital (note 7)                        105,829,363     43,515,360
    -------------------------------------------------------------------------
    Contributed surplus (note 7)                    3,724,698      2,335,783
    -------------------------------------------------------------------------
    Accumulated other comprehensive income          3,407,017              -
    -------------------------------------------------------------------------
    Retained earnings                              19,636,262     18,574,412
    -------------------------------------------------------------------------
                                                   26,767,977     20,910,195
    -------------------------------------------------------------------------
                                                  132,597,340     64,425,555
    -------------------------------------------------------------------------
                                                $ 241,358,599  $ 141,826,027
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Please refer to the accompanying notes.


    Approved by the Board:

    Director: (signed) "A. Bruce Macdonald"
              -----------------------------

    Director: (signed) "Michael Halvorson"
              ----------------------------



    CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
    (unaudited)

                              Three months ended           Nine months ended
                                    September 30                September 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue
    -------------------------------------------------------------------------
      Production      $ 17,083,645  $ 16,146,593  $ 49,925,274  $ 51,907,950
    -------------------------------------------------------------------------
      Less: royalties,
       net of ARTC      (3,856,285)   (3,636,026)  (11,471,690)  (11,753,091)
    -------------------------------------------------------------------------
                        13,227,360    12,510,567    38,453,584    40,154,859
    -------------------------------------------------------------------------
    Expenses
    -------------------------------------------------------------------------
      Depletion,
       depreciation &
       accretion         7,930,877     6,076,606    20,257,372    18,822,797
    -------------------------------------------------------------------------
      Production         5,529,185     3,921,169    13,808,873    10,355,917
    -------------------------------------------------------------------------
      General &
       administrative    1,467,043       813,277     3,627,946     2,395,300
    -------------------------------------------------------------------------
      Interest             871,507       573,189     2,211,280     1,486,085
    -------------------------------------------------------------------------
      Stock-based
       compensation
       (note 7)            619,122       518,838     1,590,504     1,167,575
    -------------------------------------------------------------------------
                        16,417,734    11,903,079    41,495,975    34,227,674
    -------------------------------------------------------------------------
    Income (loss)
     from operations    (3,190,374)      607,488    (3,042,391)    5,927,185
    -------------------------------------------------------------------------
    Gain on sale of
     short-term
     investments         4,351,900             -     4,351,900             -
    -------------------------------------------------------------------------
    Income before
     income taxes        1,161,526       607,488     1,309,509     5,927,185
    -------------------------------------------------------------------------
    Income taxes
    -------------------------------------------------------------------------
      Current               57,057        80,100       132,688       255,436
    -------------------------------------------------------------------------
      Future (recovery)   (605,921)      423,251      (277,142)    1,983,494
    -------------------------------------------------------------------------
                          (548,864)      503,351      (144,454)    2,238,930
    -------------------------------------------------------------------------
    Net income           1,710,390       104,137     1,453,963     3,688,255
    -------------------------------------------------------------------------
    Retained earnings,
     start of period    18,018,717    19,683,365    18,574,412    18,333,893
    -------------------------------------------------------------------------
    Less: excess of
     cost of shares
     acquired over
     stated value          (92,845)            -      (392,113)   (2,234,646)
    -------------------------------------------------------------------------
    Retained earnings,
     end of period    $ 19,636,262  $ 19,787,502  $ 19,636,262  $ 19,787,502
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income per
     share (note 7)
    -------------------------------------------------------------------------
      Basic           $       0.03  $          -  $       0.03  $       0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Diluted         $       0.03  $          -  $       0.03  $       0.09
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Please refer to accompanying notes.



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) AND ACCUMULATED
    OTHER COMPREHENSIVE INCOME
    (unaudited)

                              Three months ended           Nine months ended
                                    September 30                September 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    COMPREHENSIVE
     INCOME
    -------------------------------------------------------------------------
    Net income        $  1,710,390  $    104,137  $  1,453,963  $  3,688,255
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss)
    Change in
     unrealized gains
     and losses on
     available-for-sale
     assets, net of
     tax of $(40,010)
     (nine months ended
     September 30, 2007
     - $269,127)        (1,460,935)            -    (3,076,689)            -
    -------------------------------------------------------------------------
    Reclassification
     adjustment for
     gains included in
     net income, net
     of tax of $469,177
     (nine months ended
     September 30, 2007
     - $469,177)        (4,279,203)            -    (4,279,203)            -
    -------------------------------------------------------------------------
    Change in unrealized
     gains and losses
     on available-for-
     sale financial
     assets arising in
     the period         (5,740,138)            -    (7,355,892)            -
    -------------------------------------------------------------------------
    Comprehensive
     income (loss)    $ (4,029,748) $    104,137  $ (5,901,929) $  3,688,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    ACCUMULATED OTHER
     COMPREHENSIVE INCOME
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive
     income, beginning
     of period        $  9,147,155  $          -  $          -  $          -
    -------------------------------------------------------------------------
    Change in
     accounting
     policy (note 2)             -             -    10,762,909             -
    -------------------------------------------------------------------------
    Change in
     unrealized gains
     and losses on
     available-for-sale
     assets, net of
     tax of $509,187
     (nine months ended
     September 30, 2007
     - $818,324)        (5,740,138)            -    (7,355,892)            -
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive
     income, end
     of period        $  3,407,017  $          -  $  3,407,017  $          -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Please refer to the accompanying notes.



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)

                              Three months ended           Nine months ended
                                    September 30                September 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Operating
     activities
    -------------------------------------------------------------------------
    Net income        $  1,710,390  $    104,137  $  1,453,963  $  3,688,255
    -------------------------------------------------------------------------
    Adjustments for:
    -------------------------------------------------------------------------
      Depletion,
       depreciation &
       accretion         7,930,877     6,076,606    20,257,372    18,822,797
    -------------------------------------------------------------------------
      Stock-based
       compensation
       (note 7)            619,122       518,838     1,590,504     1,167,575
    -------------------------------------------------------------------------
      Gain on sale of
       short-term
       investments      (4,351,900)            -    (4,351,900)            -
    -------------------------------------------------------------------------
      Future income
       taxes (recovery)   (605,921)      423,251      (277,142)    1,983,494
    -------------------------------------------------------------------------
      Asset retirement
       expenditures       (138,541)      (37,498)     (166,411)      (91,927)
    -------------------------------------------------------------------------
                         5,164,027     7,085,334    18,506,386    25,570,194
    -------------------------------------------------------------------------
    Changes in non-
     cash working
     capital items       4,215,689     3,101,614    (1,557,283)    5,035,958
    -------------------------------------------------------------------------
                         9,379,716    10,186,948    16,949,103    30,606,152
    -------------------------------------------------------------------------
    Investing
     activities
    -------------------------------------------------------------------------
    Capital
     expenditures       (8,070,258)  (13,121,421)  (26,450,380)  (32,645,278)
    -------------------------------------------------------------------------
    Corporate
     acquisition
     (note 3)           (2,796,799)            -   (76,392,111)            -
    -------------------------------------------------------------------------
    Acquisition of
     investments                 -             -             -      (102,125)
    -------------------------------------------------------------------------
    Proceeds from sale
     of investments      5,208,355             -     5,208,355             -
    -------------------------------------------------------------------------
    Changes in non-
     cash working
     capital items      (2,697,582)    3,165,538     1,949,566        67,256
    -------------------------------------------------------------------------
                        (8,356,284)   (9,955,883)  (95,684,570)  (32,680,147)
    -------------------------------------------------------------------------
    Financing
     activities
    -------------------------------------------------------------------------
    Proceeds from
     (repayment on)
     bank debt, net       (630,000)     (500,000)   18,400,000     4,190,000
    -------------------------------------------------------------------------
    Redemption of
     share capital        (387,681)            -      (794,296)   (2,820,255)
    -------------------------------------------------------------------------
    Proceeds on
     issuance of share
     capital, net           46,721       277,118    61,166,098       594,806
    -------------------------------------------------------------------------
    Changes in non-
     cash working
     capital items           5,789        (5,207)        9,827       117,145
    -------------------------------------------------------------------------
                          (965,171)     (228,089)   78,781,629     2,081,696
    -------------------------------------------------------------------------
    Increase in cash        58,261         2,976        46,162         7,701
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     beginning of
     period                  6,307        17,815        18,406        13,090
    -------------------------------------------------------------------------
    Cash and cash
     equivalents,
     end of period    $     64,568  $     20,791  $     64,568  $     20,791
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental cash
     flows disclosure:
    -------------------------------------------------------------------------
    Interest paid     $    871,507  $    573,189  $  2,211,280  $  1,486,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Income taxes paid $          -  $          -  $    272,505  $    292,998
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Please refer to the accompanying notes.



    NOTES TO THE SEPTEMBER 30, 2007 INTERIM CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)

    1.  Accounting Policies

    The interim consolidated financial statements of Gentry Resources Ltd.
    ("Gentry" or the "Company") have been prepared in accordance with
    generally accepted accounting principals in Canada, which were the same
    accounting policies and methods of computation as the consolidated
    financial statements as at December 31, 2006, except as disclosed in
    Note 2. The disclosure which follows is incremental to the disclosure
    included in the annual consolidated financial statements. The interim
    consolidated financial statements should be read in conjunction with the
    Company's consolidated financial statements and notes thereto for the
    year ended December 31, 2006.

    2.  Changes in Accounting Policies

    Financial Instruments and Hedging Activities

    Effective January 1, 2007, the Company adopted the following new Canadian
    Institute of Chartered Accountants ("CICA") sections:

           -  Section 1530, Comprehensive Income;
           -  Section 3855, Financial Instruments - Recognition and
              Measurement; and
           -  Section 3865, Hedges.

    These new accounting standards provide requirements for the recognition
    and measurement of financial instruments and the use of hedge accounting.
    The standards have been adopted prospectively and comparative financial
    statements have not been restated.

    Comprehensive Income

    Section 1530 establishes standards for the reporting and presenting of
    comprehensive income and other comprehensive income. Comprehensive income
    is defined as the change in equity from transactions and other events
    from non-owner sources and other comprehensive income comprises revenues,
    expenses, gains and losses that, in accordance with generally accepted
    accounting principles, are recognized in comprehensive income but
    excluded from net income.

    Financial Instruments - Recognition and Measurement

    Section 3855 prescribes when a financial asset, financial liability or
    non-financial derivative is to be recognized on the balance sheet and at
    what amount, requiring fair value or cost-based measures under different
    circumstances. All financial instruments must be classified as one of the
    following five categories: held-for-trading; held-to-maturity
    instruments; loans and receivables; available-for-sale financial assets;
    or other financial liabilities. All financial instruments, with the
    exception of loans and receivables, held-to-maturity investments and
    other financial liabilities measured at amortized cost, are reported on
    the balance sheet at fair value. Subsequent measurement and changes in
    fair value will depend on their initial classification. Available-for-
    sale financial assets are measured at fair value with changes in fair
    value recorded in other comprehensive income until the investment is
    derecognized or impaired at which time the amounts would be recorded in
    earnings.

    Derivatives

    All derivative instruments, including embedded derivatives, are recorded
    on the balance sheet at fair value unless they qualify for the normal
    sale and purchase exception. All changes in fair value are included in
    earnings unless cash flow hedge or net investment accounting is used, in
    which case, changes in fair value are recorded in other comprehensive
    income to the extent the hedge is effective, and in earnings to the
    extent it is ineffective.

    The Company has not identified any material embedded derivatives in any
    of its financial instruments. The Company has elected to account for its
    commodity sales contracts and other non-financial contracts, held for the
    purpose of receipt or delivery of non-financial items in accordance with
    its expected purchase, sale or usage requirements on an accrual basis.

    Hedge Accounting

    Section 3865 established standards for when and how hedge accounting may
    be applied. Hedge accounting continues to be optional and the Company
    does not currently apply hedge accounting.

    Effect of Changes in Accounting Policies
    ----------------------------------------
    As a result of adopting these new standards, on January 1, 2007, the
    Company classified its short-term investments as available-for-sale
    financial assets and as a result, short-term investments were increased
    by $12,086,008, future income taxes liability was increased by $1,323,099
    and accumulated other comprehensive income was increased by $10,762,909.

    Accounting Changes

    Effective January 1, 2007, the Company adopted the revised
    recommendations of CICA Section 1506, Accounting Changes. Under the
    revised standards, voluntary changes in accounting policies are permitted
    only if they result in financial statements which provide more reliable
    and relevant information. Accounting policy changes are applied
    retrospectively unless it is impractical to determine the period or
    cumulative impact of the change. Corrections of prior period errors are
    applied retrospectively and changes in accounting estimates are applied
    prospectively by including these changes in earnings. These standards are
    effective for all changes in accounting policies, changes in accounting
    estimates and corrections of prior period errors initiated in periods
    beginning on or after January 1, 2007.

    Goodwill

    Goodwill represents the excess of the purchase price of the business
    combination acquired over the fair value of the net assets acquired at
    the date of acquisition.

    Goodwill is not amortized but is subject to an annual impairment review
    or more frequent if circumstances exist that might indicate the value is
    impaired. Should the carrying value exceed the fair value of Goodwill,
    the carrying value will be written down to the fair value. The test for
    impairment is conducted by comparing the book value to the fair value of
    the net assets acquired.

    Principles of Consolidation

    The consolidated financial statements include the accounts of the Company
    and its wholly-owned subsidiaries until June 1, 2007, at which time the
    subsidiaries were amalgamated with the Company.

    Future Accounting Pronouncements

    As of January 1, 2008, the Company will be required to adopt two new CICA
    standards, Section 3862 "Financial Instruments - Disclosures" and Section
    3863 "Financial Instruments - Presentation" which will replace Section
    3861 "Financial Instruments - Disclosure and Presentation". The new
    disclosure standard increases the emphasis on the risks associated with
    both recognized and unrecognized financial instruments and how those
    risks are managed. The new presentation standard carries forward the
    former presentation requirements. The new financial instruments
    presentation and disclosure requirements were issued in December 2006 and
    the Company is assessing the impact on its financial statements.

    As of January 1, 2008, the Company will be required to adopt CICA Section
    1535 "Capital Disclosures" which will require additional disclosures of
    objectives, policies and processes for managing capital. In addition,
    disclosures will include whether companies have complied with externally
    imposed capital requirements. The new capital disclosure requirements
    were issued in December 2006 and the Company is assessing the impact on
    its financial statements.

    In January 2006, the CICA Accounting Standards Board adopted a strategic
    plan for the direction of accounting standards in Canada. As part of the
    plan, accounting standards in Canada for public companies are expected to
    converge with International Financial Reporting Standards ("IFRS") by the
    end of 2011. The Company continues to monitor and assess the impact of
    the convergence of Canadian GAAP and IFRS.

    3.  Business Combination

    On April 30, 2007, the Company entered into a Share Purchase and Sale
    Agreement to acquire all of the issued and outstanding shares of 1317010
    Alberta Ltd. ("1317010") for total cash consideration of $76,392,111,
    including costs of $954,689 (the "Acquisition"). The Acquisition had an
    effective date of April 1, 2007 and closed May 31, 2007, with the closing
    being subject to customary industry conditions. The earnings of 1317010
    have been included in these financial statements commencing June 1, 2007.

    The costs of the Acquisition were allocated as follows:

    -------------------------------------------------------------------------
    Petroleum and natural gas properties                        $ 77,109,915
    -------------------------------------------------------------------------
    Goodwill                                                       5,985,970
    -------------------------------------------------------------------------
    Working capital                                                3,155,433
    -------------------------------------------------------------------------
    Asset retirement obligations                                  (4,368,476)
    -------------------------------------------------------------------------
    Future income taxes                                           (5,490,731)
    -------------------------------------------------------------------------
                                                                $ 76,392,111
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The above amounts are estimates made by management based on currently
    available information. Amendments may be made to the purchase equation as
    the cost estimates and balances are finalized.

    No amount of the Goodwill is expected to be deductible for income tax
    purposes.

    4.  Property and Equipment

                                                 September 30,   December 31,
                                                         2007           2006
                                                   (unaudited)      (audited)
    -------------------------------------------------------------------------
    Petroleum and natural gas properties
     including exploration and
     development thereon                        $ 227,107,547  $ 149,592,699
    -------------------------------------------------------------------------
    Production equipment and facilities            80,285,206     54,190,215
    -------------------------------------------------------------------------
    Other                                           1,065,893        973,488
    -------------------------------------------------------------------------
                                                  308,458,646    204,756,402
    -------------------------------------------------------------------------
    Accumulated depletion and depreciation        (97,373,681)   (77,330,851)
    -------------------------------------------------------------------------
                                                $ 211,084,965  $ 127,425,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    As at September 30, 2007, costs of unproved petroleum and natural gas
    properties amounting to $31,896,297 (December 31, 2006 - $22,054,459)
    have been excluded from the depletion calculation. During the nine months
    ended September 30, 2007, the Company capitalized $1,202,673 (2006 -
    $1,070,694) in general and administrative expenses.

    5.  Bank Debt

    The Company has an uncommitted demand revolving credit facility to a
    maximum of $72.5 million. The facility is available to the Company by way
    of prime rate based loans, bankers' acceptances and letters of credit,
    with interest payable monthly. Currently, the interest rate is at the
    bank's prime lending rate plus 0.125%. Effective January 1, 2008, the
    interest rate will be determined quarterly on a grid system based upon
    the Company's debt to cash flow ratio, with the grid ranging from prime
    to prime plus 1.5%. The facility is secured by a general assignment of
    book debts, a $100 million demand debenture with a floating charge over
    all assets with a Negative Pledge and Undertaking to provide fixed
    charges upon request. The Company must comply with certain financial and
    other reporting requirements and may not breach certain financial tests
    without the prior consent of the bank. The credit facility may be
    reviewed periodically by the bank, with the next review being scheduled
    on or before February 29, 2008.

    6.  Asset Retirement Obligations

    The following table summarizes changes in the asset retirement
    obligations:

                                                 September 30,   December 31,
                                                         2007           2006
                                                   (unaudited)      (audited)
    -------------------------------------------------------------------------
    Asset retirement obligations,
     start of period                            $   5,104,300  $   3,473,144
    -------------------------------------------------------------------------
    Liabilities related to business
     combination (note 3)                           4,368,476              -
    -------------------------------------------------------------------------
    Liabilities incurred                              141,951      1,684,394
    -------------------------------------------------------------------------
    Liabilities settled                              (166,411)      (126,137)
    -------------------------------------------------------------------------
    Accretion expense                                 214,542        204,337
    -------------------------------------------------------------------------
    Liabilities disposed                                    -       (131,438)
    -------------------------------------------------------------------------
    Asset retirement obligations,
     end of period                              $   9,662,858  $   5,104,300
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The inflated, undiscounted amount of the estimated future cash flows
    required to settle the obligations is $17,959,788 (December 31, 2006 -
    $9,809,550). These obligations are expected to be paid over the next
    several years with a weighted average life of approximately 11 years
    (2006 - 11 years). The estimated future cash flows have been discounted
    at the credit-adjusted risk free rate of 6.00%. As at September 30, 2007,
    no funds have been set aside to settle these obligations.

    7.  Share Capital

    Authorized

    Gentry's authorized share capital consists of an unlimited number of
    voting common shares and an unlimited number of non-voting preferred
    shares. No preferred shares have been issued.

    Issued

    Common Shares                            Number of Shares   Stated Value
    -------------------------------------------------------------------------
    Balance - December 31, 2006                    38,811,130  $  43,515,360
    -------------------------------------------------------------------------
    Shares issued for cash                         16,250,000     65,000,000
    -------------------------------------------------------------------------
    Share issuance costs, net of tax
     of $1,348,503                                          -     (3,001,506)
    -------------------------------------------------------------------------
    Stock options exercised for cash                  234,400        429,951
    -------------------------------------------------------------------------
    Transferred from contributed surplus
     on options exercised                                   -        115,433
    -------------------------------------------------------------------------
    Employee share ownership plan                      49,485        172,312
    -------------------------------------------------------------------------
    Normal course issuer bid purchases               (249,000)      (402,187)
    -------------------------------------------------------------------------
    Balance - September 30, 2007                   55,096,015  $ 105,829,363
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    On April 30, 2007, Gentry entered into a bought deal equity issue of
    12,500,000 subscription receipts of Gentry at a price of $4.00 per
    subscription receipt and 3,750,000 common shares for aggregate proceeds
    of $65 million. Each subscription receipt was converted into one common
    share without further payment or action on the part of the holder
    concurrently with the closing of the Acquisition (note 3). Transaction
    costs were estimated to be $4.35 million with an associated future tax
    effect of $1.35 million.

    Stock Options

                                                                Weighted Avg.
                                                    Number of       Exercise
                                                      Options          Price
    -------------------------------------------------------------------------
    Balance - December 31, 2006                     3,226,900  $        3.24
    -------------------------------------------------------------------------
    Granted                                         1,412,500           3.92
    -------------------------------------------------------------------------
    Exercised                                        (234,400)          1.83
    -------------------------------------------------------------------------
    Cancelled                                        (205,000)          5.06
    -------------------------------------------------------------------------
    Balance - September 30, 2007                    4,200,000  $        3.46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Exercisable - September 30, 2007                2,147,499  $        2.46
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Stock-based Compensation Expense

    The fair value of stock options granted during 2007 was estimated on the
    dates of grant using the BlackScholes option pricing model with the
    following assumptions:

        -  Risk free interest rate of 4.02% to 4.73%
        -  Expected life of options of 4.0 years
        -  Expected volatility of 71.34% to 76.45%
        -  Expected dividend rate of 0%
        -  Weighted average fair value per option granted of $2.07

    Compensation costs of $588,039 for the three months ended September 30,
    2007 (2006 - $490,763) and $1,504,348 for the nine months ended
    September 30, 2007 (2006 - $1,087,531) have been expensed and have
    resulted in corresponding increases in contributed surplus in the
    respective periods.

    Contributed Surplus

                                                                      Amount
    -------------------------------------------------------------------------
    Balance - December 31, 2006                                $   2,335,783
    -------------------------------------------------------------------------
    Stock-based compensation expense                               1,504,348
    -------------------------------------------------------------------------
    Transferred to share capital on options exercised               (115,433)
    -------------------------------------------------------------------------
    Balance - September 30, 2007                               $   3,724,698
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net Income Per Share

    The following table reconciles the denominators used for the basic and
    diluted net income per share calculations:

                              Three months ended           Nine months ended
                                    September 30                September 30
                              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Basic weighted
     average shares     55,167,799    38,602,833    46,325,798    38,629,930
    -------------------------------------------------------------------------
    Effect of dilutive
     stock options               -     1,786,352             -     1,696,330
    -------------------------------------------------------------------------
    Dilutive weighted
     average shares     55,167,799    40,389,185    46,325,798    40,326,260
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The calculation of diluted net income per share for the three and nine
    months ended September 30, 2007 does not include any outstanding stock
    options (2006 - 1,055,000) as the inclusion of these options would have
    been anti-dilutive.

    8.  Subsequent Event

    On October 24, 2007, the Company sold 2,000,000 of its 5,683,839 shares
    of Stratic Energy Corporation for net proceeds of $1.98 million.


                            CORPORATE INFORMATION

    Directors                           Head Office

    Hugh G. Ross                        2500, 101 - 6th Avenue S.W.
    President and Chief Executive       Calgary, Alberta, Canada T2P 3P4
     Officer                            Telephone: (403) 264-6161
    Gentry Resources Ltd.               Facsimile: (403) 266-3069
    Calgary, Alberta                    Website: www.gentryresources.com
                                        Email: gentry@gentryresources.com
    Michael Halvorson
    President, Halcorp Capital Ltd.
    Edmonton, Alberta                   Auditors

    A. Bruce Macdonald                  Collins Barrow Calgary LLP
    Chairman, Jayhawk Resources Ltd.    Chartered Accountants, Calgary,
    Calgary, Alberta                     Alberta

    Walter O'Donoghue
    Independent Director                Bankers
    Calgary, Alberta
                                        National Bank of Canada
    Dean G. Prodan                      Energy Group, Calgary, Alberta
    President, UTA Asset Management
     Corporation
    Calgary, Alberta                    Solicitors

    Robert R. Rooney                    Blake Cassels & Graydon, LLP
    Independent Director                Calgary, Alberta; Toronto, Ontario
    Calgary, Alberta

    Officers                            Engineers

    Hugh G. Ross                        Sproule Associates Limited
    President and Chief Executive       Calgary, Alberta
     Officer

    Ketan Panchmatia                    Registrar and Transfer Agent
    VP Finance and Chief Financial
    Officer                             Computershare Trust Company
                                         of Canada
    R. Gordon McKay                     Calgary, Alberta; Toronto, Ontario
    Chief Operating Officer

    Ken Wilson                          Stock Exchange
    Vice President, Operations &
     Production                         The Toronto Stock Exchange
                                        Trading Symbol: GNY
    Harley Kempthorne
    Vice President, Engineering
                                        Investor Relations
    Greg Groten
    Vice President, Exploration         Roger Fullerton
                                        Manager, Investor Relations
    Lawrence B. Buzan                   Telephone: (952)929-7243
    Vice President, Land &              Email: roger@gentryresources.com
     Negotiations
    





For further information:

For further information: please contact Hugh Ross, (403) 264-6161; OR
Ketan Panchmatia, (403) 264-6161; OR Roger Fullerton,(952) 929-7243

Organization Profile

GENTRY RESOURCES LTD.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890